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‘Perfect storm’ causing industry ‘nosedive’

Britain’s manufacturers are firmly in a ‘nosedive’ as the ‘perfect storm’ of Brexit uncertainty, a slowdown in major markets and trade wars take their toll, according to a survey published by Make UK (the manufacturers’ organisation) and business advisory firm BDO.

This Manufacturing Outlook survey comes on the back of the latest PMI data showing that all indicators have weakened significantly, with investment and domestic orders in particular turning negative.

The survey also shows that a weaker currency is providing no solace, with export orders down despite prices falling. This indicates that foreign customers are not buying British goods, even though they are 6% cheaper than this time last year.

Tom Lawton, head of manufacturing at BDO (www.bdo.co.uk), said: “Global competition, skills shortages, lack of a coherent industrial strategy from Government and continuing technological disruption have made UK manufacturing a challenging sector for decades.

The long shadow cast by the possibilities of a ‘no-deal’ Brexit and the uncertainty of recent months has only added to the difficulties for the sector.

“A cliff-edge decision on a ‘deal’ or ‘no-deal’ Brexit will mean a double whammy of continuing weaker demand for products and fundamental disruption to supply chains.

The impact on supply chains will be particularly felt in the UK automotive sector, where car parts are sourced from different European countries and delivered on a just-in-time basis before being finally assembled in the UK.

“Already suffering from a fall in output for 14 successive months, car assembly — the jewel in the crown of UK manufacturing — would be hit particularly hard by a ‘no-deal’ Brexit.

The Government must strain every sinew to reach a Brexit ‘deal’ that protects UK manufacturing.

“With this harsh outlook it is not surprising that both investment and recruitment intentions have also weakened significantly. Recruitment has continued the decline witnessed for the last four quarters.

“Furthermore, investment intentions, which have been paralysed for the last year, have now entered negative territory for the first time since Q3 2016 — the immediate aftermath of the Brexit referendum.”

As a result of this weakening picture, Make UK is now forecasting manufacturing growth of just 0.1% in 2019 (down from 0.2%) and 0.6% in 2020 (down from 0.8%).

GDP is forecast at 1.1% in 2019 and 1.4% in 2020.

Make UK says these forecasts are based on avoiding a ‘no-deal’ Brexit.